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Law unto itself: the private equity firm Montagu's £200m acquisition of the College of Law is to include its degree-awarding powers

The private equity buyer of the charitable College of Law will own the institution "with its attached degree-awarding powers", according to the UK's standards watchdog, while the model used in the sale "can be used by all UK universities" to attract private investment, a legal expert has said.

The statement from the Quality Assurance Agency came after last week's announcement of the private college's £200 million conditional sale to Montagu Private Equity and amid debate over the future status of its coveted degree-awarding powers.

The Privy Council grants degree-awarding powers, on which the QAA takes an advisory role.

Degree-awarding powers are not limited by subject area, so the college - which will change legal status from charity to for-profit business under the new owners - could decide to expand course provision.

Stephen Jackson, QAA director of reviews, said: "If the College of Law maintains the identity under which it was given degree-awarding powers, then it will retain those powers in the event of a change of ownership.

"However, the powers stay with the college; they are not transferred to the new owner."

The QAA's statement added: "The new owners will own the College of Law (with its attached DAP)."

The college's powers, granted in 2006, are due for renewal by the Privy Council by 31 August this year (non-state-funded institutions with the powers must reapply every six years).

The QAA returned "confidence" judgements in its review of the powers in May last year.

The college says on its website that the sale is "conditional on the receipt of a number of regulatory consents, which are expected to be forthcoming over the coming months".

If the QAA advises that an institution has been a QAA subscriber for six years, been subject to QAA audit, and received confidence judgements, then the "relevant minister" (in this case, Vince Cable) will normally recommend renewal of degree-awarding powers to the Privy Council.

Like some universities, the college is a charity with a Royal Charter, so the sale establishes an important model.

The college has transferred its assets to a company that will be sold to Montagu. The sale proceeds will establish a fund for legal education scholarships to be called the Legal Education Foundation - and it is this body that will fulfil the former college's charitable objectives as well as retaining the Royal Charter.

Glynne Stanfield, a partner in the education group at law firm Eversheds, which drew up the model used in the sale, said the model "can be used by all UK universities not just to sell - I think sales will be rare - but to allow private-sector investment".

He added that there would "no doubt be many innovative structures developed...as the government seeks to reduce taxpayer funding in higher education".

If a university were to sell a partial stake to a private investor, it could transfer a portion of its assets to a separate company that could then be bought by the investor. The £200 million price for the college "shows the value of degree-awarding powers", added Mr Stanfield.

'In the charity's best interests'

A Charity Commission spokeswoman said that "having carefully considered the circumstances", the commission was satisfied that the transfer of the college's properties and college business to a company owned by the charity "is in the best interests of the charity. Therefore...we granted an order for the College of Law authorising the transfer."

She continued: "Although an order was required to transfer the properties and business to the company, the charity does not require the commission's authorisation to sell these assets."

On wider implications, she said: "The...arrangement made by the College of Law is only one possible way to attract private investment and won't be right for most charities."